What Is the Role of an IRA Custodian?
An IRA custodian is an organization, such as a bank or other financial institution, that holds and maintains its clients' individual retirement accounts (IRAs). The role of an IRA custodian varies depending on the type of IRA involved.
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Function
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In addition to holding the assets of the IRA, an IRA custodian generally also conducts any transactions associated with the IRA, and keeps records regarding those transactions.
Types
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An IRA can be managed solely by the custodian or be self-directed, which means the owner makes his own investment decisions and the custodian merely carries them out.
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Fees
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Many IRA custodians charge for each transaction, such as buying or selling shares of stock, but others charge an annual fee that encompasses all duties performed in a year.
Considerations
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Because the owner of a self-directed IRA has more investment options and can direct the custodian to make a trade at any time during the year, custodial fees for those types of IRAs are generally more expensive.
Warning
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IRA custodians typically are not allowed to give legal or tax advice, and cannot legally make investment suggestions. The owner of the IRA is responsible for ensuring compliance with the tax code and for resolving any legal issues that arise.
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References
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